Tax Compliance

Our experts at Enterslice will help you with expert solutions to simplify the tax obligation, which will maximize your efficiency, ensuring legal compliance and financial responsibility. Package inclusions: Tax Compliance Services Guidance in different types of taxes in Japan Direct and Indirect..

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Overview of Tax Compliance in Japan

The East Asian island nation of Japan, commonly known as the Land of the Rising Sun, is situated there. Japan is a significant global actor with a robust economy, a rich cultural legacy, and cutting-edge technology. The nation has a distinctive tax structure intended to support its varied industries and guarantee the efficient operation of its economy. Both the national and municipal governments in Japan impose taxes. Among other things, the national taxes include inheritance, consumption, business, and income taxes. Property, prefectural, and municipal taxes are examples of local taxes. 

Types of Taxes in Japan

  • Tax on Corporate Income:In simple terms, the tax on the companies' income is called the corporate income tax. This tax includes: 
    • Corporation tax 
    • National Local Corporate Tax 
    • Standard Enterprise Tax
    • Inhabitant Tax
    • Effective Tax Rate
    • Size-Based Enterprise Tax

Companies with a share capital of over JPY 100 million are subject to a regular corporation tax rate of 23.2%. Additionally, based on their corporation tax responsibilities, corporate taxpayers must pay a national, local corporate tax at a rate of 10.3%. Additionally, a corporation's revenue that is distributed to each prefecture and city (municipal borough) is subject to an inhabitant's tax. This allocation is often calculated using the number of workers, much like the enterprise tax computation. The prefectural tax rate is now 4.2%, and the municipal tax rate is currently 12.1%. However, both rates are subject to change based on the judgment of each local authority. After accounting for all these taxes, the total effective tax rate is 30.62%.

  • Consumption Tax: The sale of goods and services in Japan is subject to a national tax known as the consumption tax. It is similar to other nations' goods and services taxes (GST) or value-added taxes (VAT). Companies in Japan are required to collect the consumption tax or value-added tax (VAT) whether they sell products, provide services, or import products. On October 1 of this year, the tax rate was increased to 10%.
  • Custom Duty: A tax known as customs duty is levied on merchandise entering or leaving Japan. Aiming to safeguard domestic industries, control trade, and bring in money for the government, it is based on the value of the goods.
  • Excise Taxes: In Japan, excise taxes are imposed on a variety of items, including alcohol, cigarettes, fuel, and upscale goods. They are enforced to reduce consumption, control certain sectors, and increase tax income.
  • Stamp Duty: Contracts, deeds, and other legal papers are all subject to the stamp duty tax in Japan. Upon execution, the tax is paid to the government in an amount determined by the value or type of the Document. JYP 600,000 is the maximum amount that can be charged as a stamp duty in Japan. 
  • Fixed Assets Tax: Property owners in Japan are subject to an annual tax known as the fixed asset tax. Based on the assessed value of real estate, construction projects, and other fixed assets. Infrastructure improvement and local government services are paid for using the money raised by this levy. In Japan, the city planning tax is included in the real property tax, which is levied at a regular rate of 1.7% of the value as defined by local tax authorities. Taxes on depreciable fixed assets are calculated at a rate of 1.4% on the cost of the assets after statutory depreciation.
  • Registration and License Tax: Registration and license taxes are levied on the registration of certain property, either as a fixed charge or as a percentage depending on the taxable basis that ranges from 0.1% to 2%.
  • Family Corporation Tax:A Japanese company is considered a family corporation if a single shareholder and their family members collectively possess more than 50% of the total number of issued shares or voting rights. In light of this, the corporation's undistributed current earnings are taxable at different rates depending on the earnings:
  • 10% tax is applied to the first JPY 30 million of undistributed current earnings each year.
  • The JPY 70 million in yearly undistributed current earnings is subject to a 15% tax.
  • A 20% tax rate is applied to any undistributed current earnings that exceed JPY 100 million annually.

Services Offered By Enterslice

Key services offered by Enterslice are as below:

  • Notice of Income Tax:
    • Income tax notice advice and consultation from experts.
    • Aid in comprehending and responding to income tax notices.
    • Advisory services to guarantee adherence to tax legislation.
    • Quick handling of problems with income tax notifications.
    • Assisting in the gathering and arrangement of pertinent evidence for notice answers.
  • Tax on companies (R&D):
    • Assistance in setting up procedures and systems for gathering essential data on R&D incentives.
    • Assistance in the creation and submission of application materials for the approval and recognition of an R&D facility.
    • Identifying the expenditures that qualify for R&D incentive claims.
    • Assembling, evaluating, and facilitating claims for R&D tax incentives.
    • Through support services, assistance in maximizing R&D incentive applications.
  • Tax Litigation:
    • Advice and direction with regard to tax litigation issues.
    • Assistance in planning and submitting petitions and appeals to the appropriate courts.
    • Tax litigation issues consultation.
    • Assistance with creating notice answers.
    • Representing clients in court.
  • Services for Corporate Tax Advisory:
    • Tax knowledge, both indirect and direct
    • A full range of tax advising services.
    • Reliable services for tax compliance.
    • Suggestions for repatriation tactics.
  • Tax Efficiency:
    • Analysis and improvement of tax functions,
    • Tax data management, analysis, and reporting,
    • Creating effective tax procedures.
    • Constructing a technology road map for taxation.
    • Choosing the best tax preparation software.
  • International Tax Planning
    • Arranging investments both in and out.
    • Advice on transfer price
    • Preparing for international cash management
    • Assistance with finance, currency, and dividend repatriation.
    • Compliance with customs and indirect taxes.
  • Corporate Tax and Compliance with Regulations:
    • Comprehensive compliance and advising services for business taxes.
    • Thorough services for due diligence.
    • Assistance with legal concerns.
    • Advising and consultation services.
  • Services for international tax advice:
    • Observing international tax regulations
    • Ensuring adherence to the law.
    • Assistance for transactions in transfer pricing.
    • Other tax-related concerns being addressed

Frequently Asked Questions

Yes, tax evasion is a crime in Japan.

The sale of goods and services in Japan is subject to a national tax known as the consumption tax. It is similar to other nations' goods and services taxes (GST) or value-added taxes (VAT).

 

  • Late tax return filing penalty – 15% to 20% of the balance due
  • Underpayment penalty- 10% to 15% of the additional tax due

The late filing tax penalty in Japan is 15% to 20% of the balance that is due to pay.

The Nenmatsu-Chosei, which must be submitted by January 31 of the following year, is Japan's Year-End Tax Adjustment for wage earners.

No foreigners are not tax exempted in Japan, but foreigners are only taxed on the income sources/earned in Japan.

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